Aurelia Butler

According to Refinitiv Lipper data, U.S. bond funds witnessed outflows worth a net $8.81 billion, the most in a week since June 22. Fund flows: US equities, bonds and money market funds https://fingfx.thomsonreuters.com/gfx/mkt/zgpomgonwpd/Fund%20flows%20US%20equities%20bonds%20and%20money%20market%20funds.jpg U.S. yields across the curve, from two-year notes to 30-year bonds, hit highs last seen between five and 10 weeks ago as market participants positioned for hawkish comments from Powell.Investors jettisoned U.S. taxable bond funds worth a net$7.67 billion, the biggest amount in nine weeks, while municipal bond funds saw net outflows of $1.36 billion. U.S. high yield funds also suffered $4.72 billion worth of net selling, the biggest outflow in over two months, while general domestic taxable fixed income, and short/intermediate government & treasury funds recorded net withdrawals of $1.7 billion and $883 million respectively. Fund flows: US bond funds https://fingfx.thomsonreuters.com/gfx/mkt/lgvdwydonpo/Fund%20flows%20US%20bond%20funds.jpg However, safer money market funds drew their biggest weekly net inflow since July 6 at $11.07 billion.U.S. equity funds were also out of favour, posting a net weekly outflow of $2.19 billion after two weeks of net purchases.Investors sold U.S. growth funds worth a net $3.31 billion in their biggest weekly disposal since July 20, while also exiting $1.75 billion in value funds. Fund flows: US growth and value funds https://fingfx.thomsonreuters.com/gfx/mkt/byvrjygqlve/Fund%20flows%20US%20growth%20and%20value%20funds.jpg Tech and industrials recorded net outflows of $1.77 billion and $723 million, respectively, although financials attracted $1.87 billion in net buying. Fund flows: US equity sector funds https://fingfx.thomsonreuters.com/gfx/mkt/akvezkbozpr/Fund%20flows%20US%20equity%20sector%20funds.jpg More

Not for decades have Britons faced the kind of agonising choices they will confront this winter. The grim confirmation of an 80 per cent increase in the cap on household energy bills from October will force many to choose between heating and eating this Christmas. For businesses, many of whom could face a fourfold rise in bills, the decision may be between cutting jobs and shutting up shop. A surge in unemployment would compound the misery for families across the country. Whatever their other ambitions, finding ways to tackle what is a national emergency will be the defining challenge for Britain’s next prime minister.First, the new leader must level with the public. Sky-high inflation is being driven by energy prices, above all gas, and it is here that consumers will experience most pain. This is a direct result of Vladimir Putin’s invasion of Ukraine and squeeze on supplies to Europe. Ukraine is fighting not just for its independence but to defend values many European countries have long taken for granted. Britain is part of the broader economic struggle with the Kremlin.Yet the government should also emphasise that the necessary but arduous adjustment of shifting from fossil fuels to solar, wind and nuclear power, and becoming far more energy efficient, will bring long-term rewards. It will help meet climate goals, and prevent Russia from ever again being able to drive up prices.This is a seismic shock, and many billions of pounds of further state support will be needed. But the national debt is mounting, and higher interest rates make it more expensive to service. The priority must be helping the most vulnerable households and businesses to weather this winter, creating time for a broader adjustment to prices that may be high for several winters to come.The poorest households spend a greater portion of their income on energy. It is harder, too, for small and medium-sized businesses — which account for three-fifths of UK jobs — to absorb soaring bills and pass on price increases to customers. Aid must be skewed above all towards them.For households, an efficient way forward is to build on Sunak’s package of support in May, which included payments to those on means tested benefits, alongside the disabled and pensioners. For small businesses, direct support could be targeted via rebates through the business rates system, together with discretionary grants administered by local authorities. Holding down energy prices across the board for long periods, as some are advocating, could prove inordinately expensive, and dull incentives to economise. Indeed, while cutting value added tax on energy may help at the margin, VAT revenues are also useful to fund support packages and the energy transition.Short-term support for cash flow should also be paired with efforts to help businesses and households contribute to long-term energy security. The government must overcome its apparent aversion to raising awareness on how enterprise and society can ration gas and electricity use. Explicit support for businesses, ideally through the tax system, to incentivise green investments — for example in insulation and solar panels — will also keep future bills down. A halfhearted focus on this in the past has exacerbated today’s energy bind.Battling Putin’s weaponisation of gas calls for shared efforts across government, business and households. Outgoing UK prime minister Boris Johnson rightly noted this week that “If we’re paying in our energy bills . . . the people of Ukraine are paying in their blood.” Liz Truss, the frontrunner to succeed him, and her team have shown little sign of grasping the scale of the problem, and the response needed. They will need to quickly come to terms with reality. More

With inflation soaring, it’s more important than ever to calculate your household budget.The government publishes an official inflation figure to give us a general picture of how quickly consumer prices are changing. On the latest data, they rose 10.1 per cent in the year to July — and it could get worse. Economists at Citigroup have forecast a peak of over 18 per cent in January. But these are averages, calculated across all kinds of consumer spending and all types of household — student and pensioner, rich and poor, single-person and family-sized.To get a better grip on how inflation is squeezing your own budget, you need to work out your own personal inflation rate — how the prices of the goods and services you buy are rising. In broad terms, energy, fuel and food prices are now seeing the highest inflation rates, so people who spend more of their money on these basics — often low-income householders — are now seeing the biggest price increases.To help FT readers, we are launching an FT personal inflation calculator in September. To demonstrate what it can do, we are asking readers to volunteer to tell us about their household budget and how it has changed. So if you are willing to talk about your spending and put your figures through our number-crunching machine, please let us know. Email [email protected] and we will get back to you. More

LONDON (Reuters) – The dollar dipped against other major currencies on Friday, ahead of U.S. Federal Reserve Chair Jerome Powell’s widely-anticipated speech at the Jackson Hole symposium.Traders are looking for clues on the U.S. central bank’s tightening plans to combat rampant inflation when Powell speaks at 1400 GMT.The dollar index – which tracks the greenback against six major currencies – has steadily gained over the past two weeks and is just shy of the two-decade peak of 109.29 it hit in mid-July. After making small gains earlier in the session, it slipped a quarter of a percent on the day to 108.210.”(Powell) is likely to focus on the short-term challenges and endeavour to leave no doubt about the Fed’s determination in the fight against inflation,” Esther Reichelt, a forex analyst at Commerzbank (ETR:CBKG), said in a note.”If he succeeds convincingly, he could support the dollar, at least in the short term.”Fed officials have been noncommittal about the potential size of interest rate increases in their addresses at the symposium so far, but have maintained that they will drive rates up to keep inflation at bay. The Fed is due to get two more key inflation reports and more jobs data before its scheduled Sept. 20-21 meeting. In Europe, soaring energy prices stemming from Russia’s invasion of Ukraine have dimmed economic prospects and weighed on the euro and sterling, pushing them both more than 10% lower against the dollar this year.Sterling was flat on the day at $1.18410, after earlier losing as much as 0.5%, as British regulators confirmed consumer energy bills would rise 80% and warned of a “crisis” needing urgent government action. The euro gained 0.4% to $1.00120, nudging back above parity against the dollar after spending much of this week below the psychologically important level.The dollar gained 0.3% on the Japanese yen, last quoted at 136.905 yen per dollar. More

BUDAPEST (Reuters) – Hungary’s central bank is expected to raise its base interest rate by 100 basis points to 11.75% next Tuesday, with more hikes to come this year as inflation keeps rising due to surging energy prices and a weak forint.The National Bank of Hungary (NBH), which became the firstcentral bank in the European Union to start raising interestrates in June 2021, has lifted its base rate by more than 1,000 basis points since then.But inflation, running at 13.7% year-on-year in July, has outpaced the bank’s forecasts and deputy Governor Barnabas Virag said earlier this month that the bank must use all tools to prevent inflation taking on a life of its own.He said inflation could peak later and at a higher level – around 18% to 19% – than previously expected, and start declining only from next year at a slow pace. Hungarian core inflation surged to an annual 16.7% in July, the highest in 25 years.The median projection of 11 economists in an Aug. 22-26Reuters poll saw the NBH raising its base rate by 100 bps nextTuesday to 11.75%.Two of the 11 economists pencilled in smaller hikes of 50 or 75 bps.”We expect the Hungarian central bank to continue its decisive tightening with another 100bp hike next week,” said Peter Virovacz, an analyst at ING in Budapest, who sees the main rate reaching 14% by the end of this year.”We expect the central bank to slow down the pace of tightening after September… With upside risks in inflation, we see upside risks to our terminal rate call as well, which means not just higher rates but a continued tightening cycle in early 2023.”The forint sank to a record low of 416.90 versus the euro last month and has been drifting back towards that low this week, trading at 410 on Friday at 0939 GMT, pressured by a strong dollar and Hungary’s lack of agreement with the European Union about the release of EU funds to support the economy.This complicates the central bank’s fight to curb inflation.The poll forecast headline inflation would average 13.8% this year. Price growth is seen easing only to 12.15% next year, still far above the NBH’s 2% to 4% target range. More